The richest in society are twice as likely to benefit from an inheritance than the poorest, a new study by the Resolution Foundation reveals.
The think-tank’s ‘Intergenerational rapport fair? report, funded by the Family Building Society and drawing on data from a YouGov survey, explores inheritances in Britain, and the impacts of intergenerational transfer of assets on wealth and lifestyles.
The value of inheritance is on target to double over the next two decades, mainly thanks to the increase in house prices and tax avoidance measures. People born after the 1980s are set to receive an average of between £200,000 and £400,000. While the average age of those receiving such hefty inheritances is 61, families often make gifts sooner according to the report.
Yearly gifts growing in popularity
Since the global financial crisis, figures from the Office for National Statistics show that value of yearly gifts (tax free as long as the gifter lives for at least seven years after giving the gift) has soared by almost a third, from £9.2bn in 2007 to £12bn in 2017.
According to Sean McCann of NFU Mutual, property and pension wealth increases had “created more millionaire couples in Britain than ever before”.
Because so many people were sitting on vast wealth and did not want their families to lose out on anything to taxes, lump sum gifts for house deposits were increasingly popular too.
Value of inheritance to double
The Resolution Foundation says the trend of gifting to offspring is likely to continue and while the value of inheritance is set to double in the next 20 years, the recipients are in the minority, with fewer than one in three (32 percent) having benefited or expecting to benefit from an inheritance or gift in their lifetime.
Wealthier and higher-income families are significantly more likely to be recipients of substantial inheritances, with the richest fifth of earners twice as likely to receive a significant transfer as the poorest fifth (50 percent compared with 25 percent).
Such transfers can have significant impacts—such as allowing beneficiaries to purchase properties with six percent of home owners saying that they wouldn’t have been able to buy a property without the transfer, equivalent to 1.6 million households.
Too late to resolve housing crisis
Jack Leslie, Senior Economist at the Resolution Foundation, said that although the boom in household wealth had led to expectations of huge inheritance windfalls, these inheritances go to too few and were too late to resolve Britain’s youth home ownership crisis.
He added: “But with the highest-income families twice as likely to be recipients as the lowest, the benefits are far from evenly distributed. A greater role for inheritances, and wealth in general, will be a central feature of 21st Century Britain, shaping the lives of generations young and old.”
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